Personal Finance FAQs

April has officially been declared National Financial Literacy Month-and for good reason. Americans carry more than $2 trillion in consumer debt, and insufficient public education about personal finance has played a large role in that. Knowledge is power, so if you want to make the most of your money, it's definitely a good idea to learn the basics. Here, we've outlined ten FAQ that will help you gain a clear and accurate picture of your financial situation and lead you down the path to achieving financial wellness.

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1. What is credit, why do I need it, and how do I build it?

Credit is borrowed money that you can use to purchase goods and services when you need them. There are four types: revolving credit, charge cards, service credit, and installment credit. Good credit is absolutely necessary if you plan to make a major purchase, such as a car or a home, and it's super important to maintain a high credit score. Factors that impact your credit score include your payment history, debt, and length of credit history.

2. What is debt, and how do I deal with it?

Debt is the amount of money you owe to another individual or to an organization. Struggling to get out of debt is often unbelievably overwhelming, but there are many things you can do to aid in the process. For practical solutions, check out Four Steps for Getting Rid of Debt.

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3. What should I do about my student loan debt?

At the end of 2014, national student loan debt reached a record-breaking $1.16 trillion. Each year, thousands of new grads enter the job market bogged down by the weight of student loans. But never fear-you have options. For help, check out these useful tips from 360 Financial Literacy.

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4. What's the difference between a 401(k) and an IRA?

A 401(k) is a qualified employer-sponsored retirement plan. To participate, you simply allow your company to deduct a portion of your paycheck each month and divert it into your plan. Many employers offer matching contributions to a 401(k), so this option is a great way to start planning for retirement.

A Roth IRA, on the other hand, is set up directly between an individual and an investment company.

5. What should I know about banking?

With a seemingly endless supply of banking options available, your choice of both bank and type of account depends entirely on your particular needs. Do you use the ATM frequently? Do you tend to overdraft your account? These questions and more will help you determine the ideal banking strategy for you. Visit CNN's Money Essentials for more information.

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6. What about mortgages?

If at some point you decide to buy a house, chances are you'll need a home mortgage. Since homes tend to be quite pricey, a mortgage is simply a lending system that allows you to pay a fraction of the home's cost upfront (the down payment) while a bank or private lending institution loans you the rest of the money. You arrange to pay back that money-plus interest-over a set period of time (known as a term), which can be as long as 30 years. For more mortgage basics, visit LearnVest.

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7. Should I be investing?

Simply put, there are two primary ways to make money: by working or by making your money work for you. By investing, you're getting your money to create more money. Sounds great, right? Though the world of investing can be a little tricky at first, it's pretty easy to grasp the basics. If you want to learn more, check out Basic Investment Objectives from Investopedia and Investing for Beginners.

9. What should I should know about taxes?

If you're employed, you're probably all-too-familiar with April 15th. However, most people aren't fully aware of the many options available to them during tax season and often end up paying more than required. To avoid overpaying, make sure to study up on the ways you can (legally) give less to Uncle Sam each year and receive your maximum refund. Check out these helpful ideas: Stop Overpaying on Taxes and NOLO's 7 Steps to Lower Your Taxes

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10. How can I protect my financial information?

These days, our entire lives are on our phones and computers-and that includes our finances. Despite the constant threat of identity theft, however, many people do not take the proper precautions to protect their information. Simple steps like creating strong passwords, installing a firewall, and being wary of scams can all save you from a serious headache and the potential of losing thousands of dollars down the road.